Reporting Casualties Related to Madoff/Ponzi/Pyramid Schemes on in Lacerte

Per Form 4684 instructions, if you qualify to use Revenue Procedure 2009-20, as modified by Revenue procedure 2011-58, and choose to follow the procedures in the guidance, first fill out Section C to determine the amount to enter on Section B, line 28. Skip lines 19 to 27.  Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. You don't need to complete Appendix A.

If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate.

For more information, see the revenue ruling and revenue procedure by clicking on the links below:

• Revenue Ruling 2009-9, 2009-14 I.R.B. 735
• Revenue Procedure 2009-20, 2009-14 I.R.B. 749
• Revenue Procedure 2011-58, 2011-50 I.R.B. 849

Follow these steps to enter a Ponzi-Type Investment Scheme:

1. Go to Screen 17, Dispositions
2. Enter the Description of property
3. Enter the dates in Date acquired and Date sold
   • Note: Leave Cost or Basis and Sales price blank.
4. Scroll down to the Casualty and Theft section
   
5. Enter a '3' in 1= personal, 2= business, 3= income, 4= employee (code 86)
   • Note: The loss will compute on the Form 4684 which will be carried to the Schedule A, line 28, for Itemized Deductions.  If Form 1040, line 41 (AGI less standard/itemized deductions) is a negative number, then the taxpayer may incur a Net Operating Loss for the current tax year.

6. Enter the applicable investment information in the subsection for Revenue Procedure 2009-20 Safe Harbor. Be sure to enter the appropriate information in the Responsible Party input area
   • Check the box labeled Taxpayer does not plan to pursue any third-party recovery to calculate .95 percent.
   • Omit the checkbox to calculate .75 percent.